Innocent Landowner Programs and Their Effects on Environmental Risk and Property Value Impacts (Environment and the Appraiser‪)‬

This edition of "Environment and the Appraiser" examines the growing use of state programs that protect owners or purchasers of properties that may be impacted by environmental contamination. These parties may be considered "innocent landowners" under many state laws if they meet certain requirements related to the contamination source and other factors. By participating in such programs, landowners and/or prospective purchasers are relieved of certain future liabilities related to the contamination and its remediation under applicable state standards. (1) As will be seen, this reduces environmental risk and potentially adverse effects on property values. (2) As presented in Advisory Opinion 9 (AO-9), "The Appraisal of Real Property That May Be Impacted by Environmental Contamination," environmental risk may be defined as "the additional or incremental risk of investing in, financing, buying and/or owning property attributable to its environmental condition." (3) Much of this risk is related to uncertainties concerning future liabilities for remediation costs and responsibilities for those costs. In turn, environmental stigma is defined as "an adverse effect on property value produced by the market's perception of increased environmental risk due to contamination." (4) Accordingly, by mitigating risks though innocent purchaser and/ or landowner liability relief, the risk effects and adverse property value impacts of environmental stigma may be reduced.